iTunes Match seems to offer a good deal for consumers who want mobile access …

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Apple has managed to get the four major record labels on board with its upcoming iTunes Match service, ensuring that most average users will be able to avoid "weeks" of uploading songs to Apple's iCloud service. Music from independent labels might not be as forthcoming, however, thanks to Apple's terms. At least one such label, the tiny, Chicago-based Numero Group, has publicly stated it has decided to "opt out" of iTunes Match.

"We feel that a great risk is being taken by Apple and the major labels that have accepted the terms of this new product wholesale with not a thought beyond the $150 million those so-called 'big four' will probably divide and pay to their top executives," label co-onwer Ken Shipley wrote on Numero's blog on June 7, just a day after Apple announced iCloud and the iTunes Match feature.

"As we have been entrusted with an incredible wealth of creative assets, and our primary responsibility is to our partners—the artists, producers, and songwriters that make up the Numero catalog—we feel that Apple’s pittance is an insult not only to them, but every other musician, living or dead, and, if the latter is the case, their heirs," Shipley explained.

We tracked down co-owner Rob Sevier—deep in the process of getting multiple new releases out this week—to find out exactly why Apple's terms represent such a raw deal for smaller labels such as Numero, as well as the artists and songwriters whose work they distribute.

Numero Group specializes in releasing extravagant reissues of classic but little-known songs and albums by long-forgotten soul artists. The label helps bring more attention to these artists and their music to new generations of fans. "We deal with old soul artists, some that have never even heard of iPods," Sevier told Ars.

The company also prides itself on making "cultural artifacts," replete with extensive liner notes, lyrics, album art, and more. For Numero in particular, iCloud doesn't offer any tangible benefits. "We'd rather the CD, or better yet the LP, be the backup, not iCloud," he said.

But, there are bigger issues that could have serious repercussions for artists and labels, especially independent ones. "We could have quietly opted out and not said anything," Sevier said. "We don't think most of the people that read our blog really care much about the finer details of copyrights. But we know a number of other people in the industry who might go for this without thinking though all these other issues."

Legitimizing piracy

For instance, there are some concerns that the iTunes Match service effectively "legitimizes" piracy. Sevier explained that many of Numero's releases sell in the range of about 10,000 copies total, including physical and digital formats. Yet, the label has found copies of tracks from its albums on sharing sites such as MediaFire or RapidShare with download counts that far exceed sales numbers.

"People will rip your album and upload them, and you can see how many people are downloading it," Sevier explained. "And in some cases people are downloading our stuff like 80,000 times or more. We have seen, on average, anything from 10 to 20 times more downloads than legitimate sales."

"There's no way that we're not going to see matching that exceeds what we're selling legitimately," Sevier said.

What Sevier is concerned about is the fact that iTunes Match cares little for the source or quality of file in your iTunes library. As long as it matches a track in the iTunes Store library that is authorized for iTunes Match, a pointer to the 256kbps iTunes Plus AAC file will be added to your iCloud library. You can then download that high-quality file to any device authorized with your Apple ID.

For a one-time payment of $25, "pirates" could effectively replace their torrented rips of questionable quality with high-quality iTunes Store tracks, complete with accurate metadata and album artwork.

"We are primarily a physical goods company," Sevier said. "Because of that, we don't get too bogged down in bootlegging; we just can't stay up all night and worry about it. But for Apple to say that all your bootlegs are welcome, it just bothers us."

What about the fact that iTunes Match could potentially serve as a way to earn some revenue from pirated music? After all, Sevier himself concedes that people are doing it with Numero's releases, and he knows it.

In fact, TuneCore's Jeff Price made that exact argument last week, opining that iCloud could be an "industry game-changer."

"The truly innovative and radical part of the iCloud service is its ability to allow copyright holders—the labels, artists, publishers and, possibly the songwriter—to make money off of music not bought the first time around," Price wrote on the TuneCore blog. "Each time a subscriber streams or re-downloads a song via the iCloud service, the label and publisher (and possibly the songwriter for the public performance) get paid. The iCloud business model has created a way for copyright holders to make money off of pirated music without making consumers feel like they are paying for the music."

The problem, according to Sevier, is that the potential revenue is so minuscule that it likely won't even be worth taking the time to deal with the accounting, much less making up for piracy rates of 1,000 percent.

"It's not going to be enough to matter," Sevier said, noting that he estimates that each iTunes Match user would be contributing fractions of a cent per matched song. "I don't think that any of this will even filter down to artists. It doesn't matter what kind of label it is, it's just going to be an administrative mess dealing with all these micropayments. There's no way it's going to cover the hourly wage of someone working in the accounting department to even deal with."

Copyright reality

Even more important than the concerns of revenue and piracy, however, is Sevier's feeling that Apple's agreements with record labels seem to rewrite the rules of copyright. "It almost feels like the major labels are sick of being late to every game, so maybe they kind of jumped into iTunes Match," Sevier said. But just because Apple says it's OK to have users download tracks to all their devices doesn't mean legally that is necessarily so.

At issue is the byzantine network of music publishers, which are given what's called a mechanical reproduction royalty any time a song or record is duplicated. That rate is set by the Royalty Advisory Board, which is part of the Copyright Office. Any time a record label sells a CD or LP, the label has to distribute 9.1¢ to the music publishing companies, which then redistribute the money (after taking their cut) to songwriters.

There's no law or ruling from the RAB that says that making copies available via cloud services doesn't make record labels culpable for replication royalties. "Right now the only thing that is binding that says this isn't 'replication' is Apple's word," Sevier explained. "We're saying we're not sure that just because Apple says that making this available on ten computers is OK that it's not actually making copies."

Many indie artists in genres such as pop, folk, and rock write, record, and publish their own songs. For labels that work with such artists, they may only have to deal with one or maybe two people for royalties and licensing. In such cases, it might be easy to renegotiate any deal with the artists to account for the new service.

In the case of soul music, though, artists often performed songs written by one or more other songwriters. So for a 10-track album, Numero may be beholden to 10 or more publishing companies for mechanical royalties.

"We've got over 50 full-length releases, and that includes a lot of publishers," Sevier told Ars. "If just one of them decided to stick it to us after the fact, deciding it counts as a replication, we would be on the hook for the mechanical royalties."

Another compounding problem is that so far it appears that iTunes Match is "all or nothing." In iTunes Connect, where labels upload and manage all their releases, there is just one simple checkbox to opt in to iTunes Match. According to Sevier, there doesn't appear to be a way to approve just one album at a time. "So even if all the rights holders on one or a few particular releases were completely on board and fine with the rates Apple offered, we can't just add those particular releases," he said.

iTunes Match: brilliant, but flawed

Sevier says he doesn't want to necessarily be a doomsayer. "I like buying from iTunes—I don't personally give a shit about digital products, but the iTunes experience is a good experience," Sevier added. "The reason it's number one is that it's a great service. You get extras, album art, good compression. And the match service can effectively replace crappy downloads with the full iTunes quality."

From the consumer point of view, iTunes Match is "brilliant," according to Sevier. "I will definitely use the free [Previous Purchases feature] since I'll be able to access all of the stuff I've bought from iTunes and not have to permanently store it all on my computer.

"But as a user of copyrights, it's flawed. As a label we can't abandon the notion of copyrights altogether, and really, it's not even up to us."